TARLA R. SHAH, MUMBAI V. JCIT 25(2), MUMBAI

ITA 433/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5539 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 19-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Bogus purchase; Search and seizure; Earning of tax free income; Accommodation entries
• Section: 69C; 133A; 14A; 133(6); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.433/M/2017 ASSESSMENT YEAR: 2011-12 MRS. TARLA R. SHAH, 1202 ADITYA TOWER CHSL, CHANDAVARKAR ROADBORIVALI (WEST), MUMBAI 400 092 PAN: AMOPS 3922M VS. DCIT 32(3), BANDRA KURLA COMPLEX, MUMBAI 400 051 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI BHUPENDRA SHAH, A.R. REVENUE BY : SHRI V. JUSTIN, D.R. DATE OF HEARING : 26.06.2018 DATE OF PRONOUNCEMENT : 24.07.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 26.12.2016 OF THE COMMISSIONE R OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2011-12. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AUTHORITIES BELOW HAVE ERRED IN SUSTAINING/MAKING A N ADDITION OF RS.14,50,560/- OF TWO PARTIES TREATING THEM BOGUS P URCHASES U/S 69C AND THE REASONS ASSIGNED FOR DOING SO WERE WHOLLY WRONG , NOT IN ACCORDANCE WITH THE FACTS OF THE CASE AND PROVISIONS OF THE IN COME TAX ACT, 1961 AND RULES MADE THERE UNDER. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE AUTHORITIES BELOW HAVE ERRED NOT ADJUDICATING/ALLOW ING THE ADDITIONAL GROUND OF APPEAL WHEREIN A SUM OF RS.2,52,403/- WAS ADDED TO THE INCOME OF THE APPELLANT, WHEN THE APPELLANT HAD NOT CLAIMED/INCUR RED ANY EXPENSES TO EARN ITA NO.433/M/2017 MRS. TARLA R. SHAH 2 DIVIDEND INCOME OF RS.1,26,901/- U/S 14A R.W.R 8D O F THE IT ACT AND RULES MADE THERE UNDER. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY AND DELETE ALL OR ANY OF THE AFORESAID GROUNDS OF APPEALS ON OR BEFORE THE DATE OF HEARING. 3. THE ISSUE RAISED IN GROUND NO.1 IS AGAINST THE S USTAINING OF ADDITION OF RS.14,15,560/- BY LD. CIT(A) AS MADE BY THE AO TOWARDS BOGUS PURCHASES FROM TWO PARTIES UNDER SECT ION 69C OF THE ACT. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGA GED IN THE BUSINESS OF CIVIL CONTRACTOR. THE AO DURING THE COU RSE OF ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAS AVAILED ENTRIES OF BOGUS PURCHASES FROM TWO PARTIES NAMELY M/S. JINAL ENTERPRISES OF RS.13,90,830/- AND M/S. SAJ ENTERPRISE S OF RS.59,730/- AGGREGATING TO RS.14,50,560/-. THE AO ISS UED NOTICE U/S 133(6) OF THE ACT TO BOTH THE PARTIES BU T RETURNED UNSERVED. THE AO ALSO NOTED THAT THE PURCHASES FRO M THESE PARTIES WERE OFFERED TO INCOME IN THE REVISED RETUR N FILED BY THE ASSESSEE OFFERING AMOUNT OF BOGUS AS ADDITIONA L INCOME IN A.Y. 2010-11. ON THE SAME LINES THE AO TREATED THE P URCHASES FROM THESE PARTIES AS INCOME BY ADDING THE SAME TO THE INCOME OF THE ASSESSEE. 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) AFF IRMED THE ORDER OF AO ON THIS GROUND BY OBSERVING AND HOLDING AS UNDER: 3.3 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT O RDER AS WELL AS THE WRITTEN SUBMISSION OF THE APPELLANT. I HAVE ALSO PERUSED THE DETAILS FILED BY THE APPELLANT. THE RELEVANT FACTS ARE LIKE THIS. THERE WAS A SEARCH AND SEIZURE OPERATION UNDER SECT ION 132 OF THE INCOME TAX ACT IN THE CASE OF M/S NEEV INFRASTRUCTU RE PRIVATE LIMITED. IN CONNECTION WITH THE SEARCH A PERSON NAMED SHRI M AFATLAL SHAH WAS ALSO COVERED UNDER SECTION 133A OF THE IT ACT. DURI NG THE COURSE OF SURVEY PROCEEDINGS, IT WAS STATED BY SHRI MAFATLAL SHAH THAT HE WAS ITA NO.433/M/2017 MRS. TARLA R. SHAH 3 PROVIDING ACCOMMODATION ENTRIES TO VARIOUS PARTIES. IT WAS STATED THAT THE APPELLANT IS ONE OF SUCH PARTIES. IT IS SEEN FROM T HE FACTS OF THE CASE THAT BASED ON EVIDENCES DISCOVERED DURING THE COURSE OF SURVEY THE APPELLANT REVISED HER INCOME UPWARDS FOR ASSESSMENT YEARS 201 0-11, 2011- I2 & 2012-13. FOR THE ASSESSMENT YEAR 2010-11 THE APPELL ANT HAD ACCEPTED THAT SHE HAD SHOWN PURCHASES FROM M/S JINAL ENTERPRISES AND M/S SAJ ENTERPRISES. THE ADDITIONAL INCOME OFFERED BY THE APPELLANT WAS ON ACCOUNT OF SUCH UNPROVED PURCHASES ONLY. HOWEVER, THE PURCHASE S FROM THE SAME PARTIES ARE CLAIMED TO BE GENUINE DURING THE ASSESS MENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2011-12. THUS, THE APPELLAN T IS CLEARLY TAKING A CONTRADICTORY STAND HERE. WHEN THE PARTIES HAVE BEEN ACCEPTED BY THE APPELLANT HERSELF AS BOGUS DURING T HE IMMEDIATELY PREVIOUS ASSESSMENT YEAR IT SEEMS HIGHLY UNLIKELY T HAT FOR THE IMPUGNED ASSESSMENT YEAR 2011-12 THE PARTIES CONCER NED WILL SUDDENLY BECOME GENUINE AND ABOVE BOARD. AFTER CONS IDERING THE TOTALITY OF FACTS I HAVE COME TO A CONCLUSION THAT THE AO HAS RIGHTLY MADE THE ADDITION. THE SAME IS CONFIRMED. THE GROUN DS OF APPEAL NUMBER 1 IS DISMISSED. 6. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE US THAT BOTH THE PARTIES FROM WHOM THE ASSESSEE HAS MADE PURCHAS ES WERE GENUINE AND THUS AO HAS ADDED THE BOGUS PURCHASES T O THE TUNE OF RS.14,50,560/- TO THE INCOME OF THE ASSESSEE B Y NOT APPRECIATING THE FACTS IN CORRECT PERSPECTIVE. THE LD. A.R. CONTENDED THAT M/S. SAJ ENTERPRISES IS NOT A BOGUS HAWALA OPERATOR BUT A LABOUR CONTRACTOR. THE LD. A.R. DREW OUR ATTENTION TO THE PAGE NO.84 OF THE PAPER BOOK WHERE IN THE BILL OF THE SAID PARTY ARE ATTACHED IN WHICH THE BILLIN G HAS BEEN MADE FOR RAW CUTTING, LABOUR CONTRACT AND THEREFORE THE SAME SHOULD BE EXCLUDED FROM THE DISALLOWANCE ON THE GRO UND THAT THE SAID PARTY IS A LABOUR CONTRACTOR AND NOT A HAW ALA OPERATOR. AS REGARDS THE SECOND PARTY JINAL ENTERP RISES, THE LD. A.R. DREW ATTENTION TO THE PAGE NO.60 TO 84 OF T HE PAPER BOOK AND SUBMITTED THAT ALL THE BILLS WERE DULY SUP PLIED BY THE SAID PARTY MENTIONING THE QUANTITY, NATURE OF MATERI AL, CHALLAN NUMBER, LORRY NUMBER, MEASUREMENT AND RATE ETC. THE LD. A.R. FURTHER REFERRED TO THE BANK STATEMENT OF THE AS SESSEE ITA NO.433/M/2017 MRS. TARLA R. SHAH 4 FILED AT PAGE NO.85 TO 96 AND ALSO THE COPIES OF AC COUNTS OF THE SAID PARTY FILED AT PAGE NO.97 TO 100. THE LD. A.R. ALSO REFERRED TO THE CONFIRMATION LETTER, IT RETURN, BANK STATEMENT, VAT RETURNS AND AFFIDAVIT OF JINAL ENTERPRISES AS F ILED FROM PAGE NO.102 TO 106 AND THE SAID PARTY IS ALSO NOT A HAWALA OPERATOR AND HAS IN FACT SUPPLIED THE MATERIAL. FIN ALLY, THE LD. A.R. SUBMITTED THAT SINCE ALL THE DETAILS WERE FILED BEFORE THE AUTHORITIES BELOW AND ALSO THE FACT THAT THE SAID P ARTIES ARE NOT APPEARING ON THE WEBSITE OF THE SALES TAX DEPAR TMENT AND ALSO THAT SAJ ENTERPRISES WAS NOT COVERED BY THE VA T PROVISIONS AND THEREFORE THE ADDITION SO MADE ON AC COUNT OF BOGUS PURCHASES SHOULD BE DELETED. 7. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORD ER OF AUTHORITIES BELOW AND SUBMITTED THAT THE LETTER ISS UED UNDER SECTION 133(6) WAS RETURNED BACK AND THEREFORE THE ORDER OF LD. CIT(A) SHOULD BE AFFIRMED OR SET ASIDE AT THE MO ST AS THE ASSESSEE COULD NOT PRODUCE THESE PARTIES OR PRODUCE THE NECESSARY EVIDENCES BEFORE THE AO. 8. AFTER HEARING BOTH THE PARTIES AND AFTER TAKING MATERIAL INTO ACCOUNT, WE FIND THAT THE AO HAS MADE THE ADDI TION TO THE TUNE OF RS.14,50,560/- ON ACCOUNT OF BOGUS PURCHASES F ROM TWO PARTIES NAMELY M/S. JINAL ENTERPRISES AND M/S. S AJ ENTERPRISES OF RS.59,730/- AND RS.13,90,830/- AGGREGAT ING TO RS.14,50,560/-. AS REGARDS THE FIRST PARTY, WE FIND THAT THE SAID PARTY IS NOT A SUPPLIER OF GOODS BUT A LABOUR CONTRACTOR AND SUPPLIES MACHINES ON HIRE WHICH IS QUITE APPARE NT FROM THE PERUSAL OF THE BILL OF THE SAID PARTY AS FILED AT PAGE NO.84 ITA NO.433/M/2017 MRS. TARLA R. SHAH 5 AND ALSO THAT THE SAID PARTY IS NOT SUBJECT TO VAT AND THERE IS NO QUESTION OF SAID PARTY APPEARING ON THE LIST OF HAWALA TRADERS. ACCORDINGLY, THE SAME IS ORDERED TO BE DEL ETED. 8.1 AS REGARDS THE SECOND PARTY M/S. JINAL ENTERPRI SES, WE FIND THAT THE ASSESSEE HAS DULY FILED BEFORE THE AO ALL THE EVIDENCES IN THE FORM OF INVOICES, BANK STATEMENT, IT RETURNS, CONFIRMATIONS AND AFFIDAVIT FROM THE SAID PARTY AS THE SAID PARTY BELONGS TO A PERSON WHO IS FAMILY FRIEND OF T HE ASSESSEE. WE ALSO FIND FROM THE PERUSAL OF INVOICES THAT ALL LORRY RECEIPTS, CHALLAN NUMBERS WERE DULY MENTIONED BY THE SUPPLIER S ON THE INVOICES AND THEREFORE THE ASSESSEE HAS DISCHARGED ALL THE INITIAL ONUS CAST ON IT TO PROVE THE GENUINENESS OF THE PURCHASES AS THE ASSESSEE HAS FILED ALL THE NECESSA RY EVIDENCES IN THE FORM OF INVOICES, BANK STATEMENT, IT RETURNS, CONFIRMATIONS AND AFFIDAVIT OF THE SUPPLIER CONFIRM ING THE GOODS TO HAVE BEEN SUPPLIED TO THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE ARE NOT IN CONCURRENCE WITH THE F INDING OF THE LD. CIT(A) UPHOLDING THE ORDER OF AO AND THEREFO RE WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND DIR ECT THE AO TO DELETE THE ADDITION. 9. RESULTANTLY, GROUND NO.1 IS ALLOWED IN FAVOUR OF T HE ASSESSEE. 10. THE ISSUE RAISED IN 2 ND GROUND OF APPEAL IS AS REGARDS NON ADJUDICATION OF ADDITIONAL GROUND OF APPEAL WHEREIN A SUM OF RS.2,52,403/- WAS ADDED TO THE INCOME OF THE ASSESSE E UNDER SECTION 14A READ WITH RULE 8D OF THE ACT. ITA NO.433/M/2017 MRS. TARLA R. SHAH 6 11. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAS RE CEIVED EXEMPT INCOME BY WAY OF DIVIDEND TO THE TUNE OF RS.1,26,901/- WHILE NO DISALLOWANCE WAS MADE TOWARDS EARNING OF SAID INCOME. THE AO REQUIRED THE ASSESSE E TO SUBMIT THE WORKING OF DISALLOWANCE IN TERMS OF SECT ION 14A READ WITH RULE 8D OF THE ACT WHICH WAS SUBMITTED BY THE ASSESSEE VIDE LETTER DATED 26.08.13 AND IS REPRODUCED IN PARA 5.1 OF THE ASSESSMENT ORDER AND THEREAFTER THE AO D ISALLOWED RS.2,52,403/- AND ADDED THE SAME TO THE INCOME OF TH E ASSESSEE. 12. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DID NOT ADJUDICATE THE ADDITIONAL GROUND FILED BY THE ASSES SEE ON13.12.2016 ON THE GROUND THAT ASSESSEE HAS NOT GIV EN ANY REASON FOR FILING THE ADDITIONAL GROUNDS OF APPEAL AND COULD NOT EXPLAIN THE REASON WHY THE SAME WAS NOT INCORPORATE D IN THE ORIGINAL GROUND OF APPEAL FILED BY THE ASSESSEE AND ACCORDINGLY ADDITIONAL GROUND WAS NOT ADMITTED AND ADJUDICATED. 13. THE LD. A.R. SUBMITTED BEFORE US THAT THE AO HAS NOT RECORDED ANY SATISFACTION IN THE ASSESSMENT ORDER B Y REFERRING TO THE RELEVANT PARAS OF THE ASSESSMENT ORDER WHICH IS ESSENTIAL REQUIREMENT OF LAW AS PER THE PROVISIONS OF SECTION 14A(2) OF THE ACT. ALTERNATIVELY, WITHOUT PREJUDICE TO THE FIRST SUBMISSION, THE LD. A.R. SUBMITTED THAT THE EXEMPT IN COME DURING THE YEAR IS ONLY TO THE TUNE OF RS.1,26,901/ - AND THEREFORE IN NO CASE THE DISALLOWANCE COULD EXCEED THE EXEMPT INCOME. ITA NO.433/M/2017 MRS. TARLA R. SHAH 7 14. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORD ER OF AUTHORITIES BELOW SO FAR AS THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D OF THE ACT IS CONCERNED. 15. HAVING HEARD BOTH THE PARTIES AND AFTER PERUSAL OF THE RECORDS, WE FIND THAT THE AO HAS MECHANICALLY MADE THE ADDITION WITHOUT RECORDING ANY SATISFACTION WITH RE FERENCE TO THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE LD. CIT(A ) SIMPLY DID NOT ADMIT THE ADDITIONAL GROUND FOR THE REASON THAT THE ASSESSEE COULD NOT EXPLAIN THE REASON AS TO WHY IT WAS NOT INCLUDED IN THE GROUNDS OF APPEALS. IN OUR OPINION , THE RECORDING OF SATISFACTION IS MANDATORY AS PER THE P ROVISION OF SECTION 14A(2) OF THE ACT IN ABSENCE OF WHICH ANY D ISALLOWANCE MADE BY THE AO HAS TO BE DELETED. THE SAID VIEW IS SUPPORTED BY THE DECISION OF THE APEX COURT IN THE CASE OF G ODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT [(2010) 328 ITR 81 (BOM)]. WE, THEREFORE, WITHOUT GOING INTO THE SECON D PLEA OF THE COUNSEL, DECIDE THE ISSUE IN FAVOUR OF THE ASSES SEE BY SETTING ASIDE THE ORDER OF LD. CIT(A) AND DIRECTING THE AO TO DELETE THE ADDITION. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.07.2018. SD/- SD/- (C.N. PRASAD) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 24.07.2018. * KISHORE, SR. P.S. ITA NO.433/M/2017 MRS. TARLA R. SHAH 8 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.